India’s retail inflation dipped to a four-month low of 5.22% in December 2024, driven by a slowdown in food price increases, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI).
This marks a steady retreat within the Reserve Bank of India’s (RBI) target range of 2–6%.
EASING FOOD INFLATION LEADS THE WAY
The moderation in retail inflation was primarily attributed to a decline in food inflation, which fell to 8.39% in December from 9.04% in November.
Seasonal factors and improved supply chains contributed to the slowdown. However, certain categories such as meat, fish, eggs, and fruits saw prices rising faster than in the previous month.
Food prices had remained elevated for over a year, crossing 7% between November 2023 and June 2024, largely due to uneven monsoon rains. Despite the easing, food price volatility remains a concern for economists and policymakers.
STATE-WISE INFLATION TRENDS
Inflation rates varied across states, with 13 out of 22 states reporting inflation above the national average of 5.22% in December.
States like Andhra Pradesh, Gujarat, and Maharashtra reported lower inflation than the national average, reflecting regional variations in price pressures.
RBI HOLDS STEADY ON INTEREST RATES
The RBI maintained its benchmark repo rate at 6.5% during its December 2024 Monetary Policy Committee (MPC) meeting, signalling a cautious approach to monetary policy. The central bank reiterated its commitment to aligning inflation with its medium-term target of 4% while fostering economic growth.
Looking ahead, the RBI expects CPI inflation to average 4.8% for FY25, up from its earlier estimate of 4.5%, largely due to persistent food price pressures and weaker consumption demand.
As India steps into 2025, the easing inflation brings some relief to households, but challenges remain with volatile food prices and economic headwinds. The RBI’s calibrated approach to interest rates and the government’s policy interventions will play a critical role in maintaining this delicate balance.